Post on 23-May-2018
transcript
Chapter II
REVIEW OF LITERATURE
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First chapter deals with the conceptual frame work of the
present research problem and primary matters regarding the research.
It had the statement of the problem, hypothesis, objectives of the
study and the limitation of the study. But, for any specific research to
occupy the place in the development of a discipline, the researcher
must thoroughly familiar with both previous theory and research. To
assure this familiarity a review of the research literature is done. A
Survey of related studies was undertaken by the investigator to get an
insight into the work that has already been in the field of this
investigation and also to get suggestion regarding the ways and means
for the collection of relevant data and interpretation of results. An
attempt is made in this Chapter to review the existing literature on the
subject of research.
The available literature related to the present research work
studied by the researcher is divided into four categories, namely, (i).
Literature on development and evolution of the power sector, (ii).
Literature on problems and challenges of power sector in terms of
generation, transmission, distribution, etc., (iii). Literature on power
sector reforms and (iv). Literature on power sector after reforms. The
studies have been analyzed by keeping objectives, of the study to
drawn the conclusion to stren
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gthen the rationale of the present research.
Literature on development and evolution of the power sector
John Byrne YU-MI Mun (2001)1 explained that electricity was
first introduced in the 1880s in the United States and Europe, its use
expanded dramatically throughout the world, transforming almost
every aspect of daily life. It is now essential to the operation of most
modern technological systems, and, for this reason, has attained the
status of a ‘metatechnology’. The inner logic of this metatechnology
has shaped contemporary development patterns – grid expansion and
urbanisation are nearly synonymous; national and local politics – pro-
growth and pro-electrification coalitions significantly overlap; social
values, culture and identity – to be modern is to be electrified; and
community life – our connection to one another (in industrial
countries especially is often electrical (telephone, television, e-mail). It
is not surprising, therefore, that electricity supply is often viewed as
an essential public good in contemporary society.
Parameswaran (1990)2 says that even during the energy
deficiency till 1983, the state of Kerala was capable to export
electricity to other states. For two decades from 1962 only profit
making had been the prime motto through abundant hydro-power/
export of energy for the Kerala State Electricity Board. This deterred
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the board from thinking about thermal power. Today the state
depends entirely on the hydro-system for its electricity needs.
However, realistic hydro-energy estimates fall for short of the projected
electricity demand.
Yasushi Suzuki (2002)3 made an attempt to throw light on
indigenous structure as well as foreign aid policy towards India’s
electricity power development in this light of the outputs of rent
seeking process in India. It is concluded that Japan’s official
development Assistance should be carefully monitored taking into
consideration the impact output relationship in the unique rent
seeking process in India which is characterized by the political power
among the dominant proprietary classes, that prevents political week
take payers who ought to criticize and oppose this inefficient
structures, from organizing the political powers against the classes.
Navroz K. Dubash (2003)4 explained that in 1990s,
conventional wisdom about the electricity sector was turned on its
head. Previously, electricity had been considered a “natural
monopoly,” and the electricity sector in most countries was either
owned or strictly regulated by the government. Particularly in
developing countries, government leadership in the development and
use of electricity was part of a broader “social compact”. Also analysed
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imperative is to embed public debate over electricity sector reforms in
a system of sound governance, featuring transparent, open,
participatory decision-making processes. Reforms that exclude voices
that deserve to be heard have not proven to be sustainable-financially,
socially, or environmentally. Reforms that are supported by a robust
process of discussion and debate are much more likely to produce the
social consensus needed to consolidate a better, more sustainable
electricity future.
The study made by Carreon, et. al. (2006)5 found that
electrification is most closely correlated with economic growth and
urbanization. Their study further reveals that Residential and
agricultural tariffs declined in the 1970s, which aided electrification,
but progress in electrification has continued even through the flat and
rising tariffs of the 1980s. Even as the sector has experienced
enormous financial difficulties in the 1990s, electrification continued
apace. By 1997, 94.7% of the Mexican population had access to
electric power. Today, penetration has reached 96%, despite the
country’s complicated geography and remoteness of small settlements
in diverse rural areas.
UNEP (2005)6 explained that the dual challenge of ensuring
electricity for national economic development and at the same time
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provide increased electricity access to the poor parts of the population.
The aim of the workshops was to stimulate new, cost-effective
approaches to help create a sustainable energy future. Special focus
was put on the role of energy in achieving the Millennium
Development Goals (MDGs).
Bishnu Dash (2010)7 studied that The National Thermal Power
Corporation (NTPC), the state owned power generator, has evinced
interest to set up solar and wind projects in Orissa with aggregate
generation capacity of 500 MW. NTPC aims to become accompany of
75,000 MW plus company by 2017. Since the public sector company
plans to add 1000 MW through renewable energy sources, it is keen to
develop some renewable energy based projects in the state. Orissa,
which has untapped potential in wind and solar energy sectors at
locations like Chanidpur, Gopalapu and Paradeep, is considered as an
attractive investment destination. In the recent meeting with NTPC, it
was decided that OREDA would select land for these projects either in
the identified locations or any other potential locations, NTPC team
would finalise the pre-feasibility study of wind and solar based
projects at potential sites selected by OREDA.
Abey George (2000)8 has observed that the States have been
looking for options to meet the demand for power from non-hydro
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sources such as coal, diesel etc. The statistics indicate the growing
shift towards non-hydro options. However, the search for non-hydro
options is not going to be very smooth, on the following grounds. The
coal bearing regions being situated far from the state, it may not be
economically viable to operate coal-based systems. It is not easy to
find out locations for coal based power stations anywhere near the
sensitive coastline or with in the densely populated midlands. Per unit
high cost of power production not the case of any option other them
hydro including diesel and naphtha made it less attractive. However
the state has decided to go in for non-hydro option. By 2002 AD, as
much as 50% of the states electricity needs would be met from non-
hydro sources. This is an outline of the pattern of electricity
generation in Kerala, and the proposed plan for the future. It is at this
present contest of deleting priority given to hydropower, that are
needed to evaluate the history, potential and the future of SHP’s in
Kerala.
Sylvie Choukroun (2002)9 reported that Maharashtra state
government built a 2,015 megawatt power station. The Dabhol
project, requiring $2.8 billion in capital investment represented the
largest contract ever signed in India and the first foreign investment in
its power sector. In the aftermath of India’s economic crisis of 1991,
Enron was proposing to build a modern power plant that would satisfy
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India’s electricity needs at a time when most foreign companies could
not conceive of managing the risks of investing in India. According to
one banker, “to think that Enron planned to raise, as it had originally
contemplated, $1.75 billion in the debt markets at a time when
international banks were making loans to India no longer than 365
days was nothing short of inspired lunacy. It was visionary.” Enron
was rewriting the rules of power plant development for both the Indian
government and the international investment community.
Jaskiran Kaur Mathur, Dhiraj Mathur (2005)10 have stated in
their paper that state electricity boards are commercially unviable and
is responsible for the financial mess that the state electricity boards
are in. This paper examines rural electrification from a socio-
developmental perspective and argues that the direct and indirect
benefits of rural electrification in reducing the burden on women, its
positive impact on health, education and farm income, justifies the
expense of network expansion for universal access. It also advocates
multiple uses of electricity as this would enhance these benefits have
a beneficial effect on the environment, increase the viability of rural
electrification and result in savings on household (total) energy
expenditure.
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Literature on problems and challenges of power sector in terms of generation, transmission, distribution, etc.
Anthonethe, Narasimha Murthy, Amuly, Reddy (1999)11
viewed that the Indian Power Sector was opened kept for private
participation in 1991 to hasten the increase in generating capacity
and to improve the system efficiency as well. Several plants are under
construction. Till early 1999, generation had commenced at private
plants totally less than 2,000 MW, in contrast some state undertaking
had completed their projects even earlier than scheduled. The authors
observed that Independent Power Producers (IPP) claim that their
progress has been hindered by problems such as litigation financial
arrangements, and obtaining clearness and fuel supply agreements.
On other hand the state electricity boards have been burdened by
Power Purchases Agreements (PPA) that favour the IPP’s with such a
clauses as availability payment irrespective of plants utilization, tariffs
reflecting, high capital costs and returns on equally etc. They also
explained the process of inviting private participation in power sector
the problems experienced and suggested on the restructuring of the
power sector including the formation of Central and State Electricity
Regulation Commission. But still, some important problems have not
been addressed. Improving the generation capacity without
corresponding improvement of the transmission and distribution
facilities likely to further undermine system efficiency. They have also
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opined that the most important investment in infrastructures has
been the state’s responsibility because the intrinsically long gestation
coupled with the relatively low rates from serving the needs of all
categories of consumers have rendered such projects commercially
under-editable.
Sudhir Kumar Kativar (2005)12 has expressed the view that a
primarily agricultural electricity distribution subdivision in South
Rajastan reveals that distribution losses are not only very high, but
they are mostly commercial in nature, illegal hooking in both the
domestic and agriculture categories is rampant and probably
constituents the largest proportion of unaccounted energy. The
reasons for this can be traced back to factors linked to the
performance of the utility and the wider socio-political environment. It
will not be possible to bring about improvements in the current set-up
through primarily technological measures, instead reform packages
must adopt a frame work for intervention that encompassed technical,
commercial, social and institutional aspects of the problem.
Joel Ruet (2002)13 wrote that improvement in the Plant Load
Factor (PLT) and reduction in the non-technical loss at least worth
with present tariffs and increase 17 present energy level. There will
enable us not to go in for unpopular measures such as tariff increase.
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He also expressed that that state electricity boards are operated based
on self enforcing political executive instructions absence of focus on
costs and budgets in actual decision making and absence of properly
designed information system.
Government of India in its Tenth Five year Plan (2002-07)14
focuses on the serious problems that the power sector has been
suffering from which were identified as early as ten years ago.
However, no corrective action has been taken and the result is that
the power sector faces an imminent crisis in almost all States. No
State Electricity Board (SEB) is recovering the full cost of power
supplied as a result they make continuous losses on their total
operations.
Madhav Godrole (2004)15 has expressed that several state
governments, including Maharashtra, have announced free power for
farmers. In this rush towards competitive populism, the past
experience of states that adopted the suicidal policy of giving free
power for agriculture appears to have been lost sight of completely.
Moreover, considering that subsidies for agricultural consumption
largely benefit big farmers and other well-to-do people, the
subsidization of these sections by common tax payers militates
against all cannons of the welfare state.
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Shahi (2005)16 analysed that the power sector poses a serious
challenge to infrastructure development in India. A recent forecast
made by the Planning Commission indicates that India requires an
investment of US$ 300 billion for the development of power sector. In
terms of per capita power consumption, India is well below China, the
US, Russia, France, Germany, Japan and several other countries of
the world. The inadequate generation of power and its supply has
crippled industry, agriculture, trade, commercial, and domestic sector
consumers. The exorbitantly high transmission and distribution
losses have made power an expensive input and constrained India's
global competitiveness. Globalization, macro and micro economic
reforms and outmoded framework governing functioning of power
sector in India ushered in its privatization. This book also explained
developed countries would also stand to gain from the debate by
reflecting on the various models they have chosen to assist the
developing countries in the growth of their power sector. On micro
front, the book has successfully flagged issues of vital import to power
sector ranging from debt-equity mix, escrow, and risk management to
repatriation of dividends, technological up-gradation, reduction of
technical losses and thefts.
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David Newbery (2005)17 reveals that modern infrastructure,
particularly electricity, is critical to economic development. Deficits
cause shortages that constrain total output, magnifying the return to
their elimination. South Asia, faced with inefficient and bankrupt
state-owned vertically integrated electricity supply industries, was
under strong pressure to reform. An imperfect diagnosis encouraged
private investment in generation to address shortages, with IPPs
selling power under long-term contracts to the largely unreformed
state electricity boards (SEBs). Buying IPP power at prices above retail
tariffs when the SEBs could not even cover the cost of under-priced
electricity from state-owned generators exacerbated financial distress
and was a recipe for conflict. Reforming the SEBs, though
unbundling, full metering, effective accounting and management
structures creating commercial discipline, under multi-annual
regulation insulated from clientalist political pressures, is an essential
first step.
Partha, Pratim, Mibca (1996)18 wrote in issues and challenges
in Power Sector in India. They examined the various facilities and
place them in perspective physical and financial achievements in the
power sector and highlights the major issues which are presently
engaging attention of policy makers in this sector. They also tried to
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prioritize the challenges so that various impediments could be
overcome as early as possible.
The Government of India reports in the Ninth Five Year
Plan (1997-2002)19 that “the major cause of the problems being faced
in the power sector is the arbitrary and unremunerative tariff
structure”. The state governments not only desire to provide power at
concessional rates to certain sectors, especially to agriculture without
subsidizing SEBs for the issues arising out of it but also constantly
interfere in tariff setting, even though the tariff is fixed and realized by
SEBs.
According to India Infrastructure Report (2000)20 it is clearly
understood that the root of chronic inability of SEBs to rise required
investment is the uneconomic pricing of electricity. It is commented in
the report that the absence of cost based economic principles in
consumer category-wise tariff design, uneconomic level of cross
subsidies, reliance on historical rather than marginal costs and
inability to cover the costs incurred are the main weaknesses in the
tariff policy.
Kannan N. Vijayamohan Pillai (2001)21 have written on plight
of power sector in India. They have explained the significant aspects of
inefficiency costs involved in SEB’s functioning. They are physical
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performance and financial performance. The physical performance
focuses on such aspects as technical efficiency T and D losses. Their
possible under estimation as well as some aspects of institutional as
organizational inefficiency. The financial performance focuses on
performance of SEBs and the supply cost of electricity tariff and
revenue.
Literature on power sector reforms
Madhav Godbole (1998)22 has viewed that only the
privatization of distribution coupled with the setting up of effective
regulatory bodies would provide a long term and lasting solution to
the power sector imbroglio. Otherwise this type of twisting forward
and backward and sideways will continue to create an illusion of
forward movement only but not in reality.
Timma Reddy (2000)23 has opined that imposing the same set
of reforms in several States is the cause for all its of the Power Sector.
In other words a uniform system has been imposed on all states.
There is no attempt to examine specific experiences of different states
and tailor the changes needed according to the requirements of the
particular states. The problems faced by the electricity establishment
in Andhra Pradesh are not the same as that of Orissa. One can see
that only the Electricity Reforms Act passed in AP is a carbon copy of
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the Orissa Act, but also the regulations formulated by the APERC are
only a copy of the OERC.
Rama Chandra (2000)24 while carrying out a study on Power
Sector Reforms in Kerala, has expressed the view that Geographical
social, economic qualified and cultural factors of a region have a
bearing on its power consumption pattern. The case of Kerala with
regard to reform in the power sector reflects the positive as well as
relative expects characteristic of a society with rural production base
and a carbonised culture. It is opined that the lesson to be learned, is
that any reform would be welcomed only if it is preceded by open
discussion and debates among the public. Any thing imposed from
above will be opposed even if some of its implications might be
beneficial to the public KSEB appears to be resorting to the new
process of reform slowing but steadily. Enlisting consumers support
for it people will co-operate if they are convinced that they will be
benefited not just by promises and demagoguery, the credibility of an
institution, be it an, SEB or SERVC should be established beyond
doubt, it propel are to accept a reform package. What is true of Kerala
in this respect, can be true of other states as well.
Labour Department, Mantralaya, Mumbai (2002)25 explains
that State has succeeded in achieving high levels of industrialization
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and has been identified as the country’s industrial powerhouse. With
less than 10 percent of population of the country, the State accounts
for one-fourth of the gross value added by India’s industrial sector.
Upto the 1990s, the State experienced a high growth rate. However,
the State has seen a decline in growth rates in recent years. The
average annual economic growth has declined sharply from 7.8%
between 1985-86 and 1994-95 to 5.3% between 1995-96 to 1999-00.
The process of reforms cannot achieve the desired results overnight,
nor can change be brought about overnight. While it is proposed that
the reforms will be initiated in the current financial year, it is expected
that it would take 5 years to meet the objectives of the reform process.
The success of the reform process depends on its acceptance by all
stakeholders including consumers, employees and investors.
Jenina Joy Chavez- Malaluna (2000)26 expressed that the
power industry is the most scrutinized industry in the world today.
Sweeping reforms are being pushed in many countries even as
California one of the earliest states to adopt similar reforms come
under attack for its supposed failure to protect consumers and ensure
stable power supply. Reforms of the power industry has increasingly
been used as the basis for the release of funds by multilateral
development banks and international financial institutions.
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Raghu, et. al., (2001)27 Power sector reforms are being taken
up in the background of the liberalisation process that started in 1991
at the national level (when Congress party was in power) as a
precondition to the IMF/WB bail out of India from the balance of
payments (BOP) problem. Andhra Pradesh State Electricity Board
(APSEB) was formed in the year 1959 and is responsible for all the
three functions of the power sector, namely, generation, transmission
and distribution of power. There are a number of rural electric
cooperatives also functioning as supply licensees in the state. Besides
generating power from its own power plants APSEB procures power
from central sector generating stations, other states, joint venture
power plants and more recently from the private sector. The power
reform process, as is being done, has only managed to empower the
anti-people processes, individuals and institutions, who have been
responsible for the present crisis situation through finances, new
concepts and approaches. The decision-making process has not
changed, essentially it is the same which brought in the present crisis
situation – opaque, no local participation, fudged information and
statistics, adhoc planning, etc. The decision-making setting or
environment has not changed, only the actors have changed. A true
review of the reform process should go into the question of who is
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getting the free lunch, supposed to have been provided to the poor
people of India.
Sevorin Barenstein (2002)28 has felt that restructuring of
electricity markets is a more difficult task than that of aimless,
trucking natural gas and oil due to unusual combination of extreme
electric supply and extreme in electric demand. Contracting can help
to control the soaring whole sale prices and to solve some problems to
create a stable, well functioning electricity market. He suggests that
the difficulties with the outcomes so far from the experiments of
California, New York, Pennsylvania, England and Norway should not
be interpreted as a failure of restructuring but as a part of a
launching process towards an electric power industry. That is still
likely to serve customers better than the approaches of the part. He
comments that other countries should be wise to learn from the
experienced of these countries.
Srinivasan (2002)29 in his study has recommended that State
Electricity Board should be reformed into bankable, commercially and
professionally run corporate enterprise, free from political and
bureaucratic interference. He has further opined that it is a better
solution than to create conditions conductive for the private sector to
take on the task of further expansion of capacity. He has stressed that
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the provision of power for all can be achieved with the help of funds
provided from within and from outside of India.
Rao (2003)30 expressed the views that the electricity Bill, 2001
was intended to enable a major restructuring of the electricity system
in India. It would have been better if the Govt. had amended. The
existing three Acts relating to electricity were enforced three years ago
which introduced essential changes. The bill needs to be cleared
speedily. This is despite its many short-comings which can be
addressed, through later amendments after the bill is passed. The
writer opines that the cost of supply model may become an important
tool for tariff fixation and identification of subsidy/ cross subsidy.
Section 61(d) of the E Act, 2003 depicts that the consumers should
pay for the use of electricity in a reasonable manner based on average
cost of supply. Section 61(g) of the E Act 2003, shows that the tariff
progressively reflects the cost of supply of electricity and also reduces
and eliminates cross subsidies within the period to be specified by the
appropriate Commissions. Section 62(3) dictates that the Commission
shall not show any undue preference to any consumer of electricity
but may differentiate according to the consumer’s load factor, power
factor, voltage, total consumption of electricity during any specified
period or the time at which the supply is required or geographical
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position of any area, the nature of supply and the purpose for which
the supply is required.
Madhav Godbole (2003)31 opined that when the bill which was
in due course enacted as the electricity Act, 2003, was under
consideration of the standing committee of parliament. A number of
issues which deserved closer examination had been highlighted.
Several of their issues remained unattended. The Act, which is a
halfway house, also raises a number of new issues which are likely to
so serious problems in the coming years.
Ranganathan (2004)32 has stated that “The Electricity Act 2003
opens the door to immense possibilities in unleashing competition and
trading, but at the same time opens a new area of policy risk, which it
is supposed to mitigate. The act has an enabling framework to
introduce competition in generation and privatization in distribution,
but the homework in terms of addressing transition issue has been
left undone”.
T.L.Sankar (2004)33 analysed that the Electricity Regulatory
Commissions (ERCs) that have given tariff orders only two, namely
Andhra Pradesh and Haryana, have adopted the concept of cost-to-
serve whereas other ERCs, on the basis of same level data availability,
have stated categorically that the data was inadequate to estimate the
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cost-to-serve. So if one talks with reference to long-run marginal cost
as base level cost then every consumer in most states would be
considered as getting a subsidy. But if the average cost is taken as
the base level, tariffs for agriculture and small households are below
the base level and they would be called subsidised categories.
Whereas if cost-to-serve is taken into consideration, agriculture may
not be getting any subsidy at all in view of the supply being restricted
to specific hours, including mostly non-peak hours of the day. If all
factors are taken into costing the actual cost-to-serve, agricultural
demand may be lower than the average cost. The outcomes of reform,
if left to the action of natural political forces, will be complex and hard
to predict. Thus, in states with strong labour unions, large, regulated
private firms may be the likely outcome of reform rather than small,
regulated private firms or co-operatives. In states with large, unserved
rural areas, small co-operatives may result. Given the existence of
economies of density and diseconomies of geography, policymakers
should lend their own weight in support of multiple distribution
structures.
Bajaj (2004)34 examined that power sector is an area where
both the centre and the states have very vital interests, apart from its
constitutional position of being a concurrent subject. The lead in this
sector for change has come from the central government, and by and
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large many of the central policies have been responsible for where the
states are today. The author also analysed necessary for regulators to
conduct a Regulatory Impact Analysis (RIA), because regulators can
impose very large costs on the system, which perhaps are not justified
by the benefits that they are intended to produce. An example may
not be out of place in this connection. Karnataka has had for long, a
severe shortage of power. Industries have been required to provide for
captive generation capacity to cover a certain minimum percentage of
their needs. Prior to the coming into force of the Reforms Act, the
government had issued an order granting automatic permission to all
industries to set up captive power plants. However, with the passing
of the Reforms Act, the power to accord consent to the setting up of
captive generating units, which was earlier with the Electricity Boards,
has now been vested with the Commission. Though the shortage,
reliability and quality problems of grid supply still continue, the
regulator has set in position a formal approval procedure in respect of
captive generation plants. Neither under law, nor in practice, does the
regulator appear to have any justification for denying permission to
set up a captive plant. The transaction costs that are incurred in this
process do not seem to serve any purpose.
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Literature on power sector after reforms
Pradip Baijal (1996)35 has stated that “several countries, both
in the West and in the East, developed and underdeveloped, have
introduced reforms in the power sector. In all cases, as the writer
finds, the restructuring revolved around the economic and
institutional organization of the sector and the advantages of
introducing competition to raise the overall efficiency in the power
sector in India. The reforms already initiated, at the federal level, are
the enactment of laws set up regulatory commissions at the central
and state levels; bifurcation of generation and transmission wings as
district activities; recognize central and state transmission, utilities as
government companies; allow setting up of private transmission lines
within the overall supervision of operation of the government
transmission utility; and provide for regulation of transmission by the
central and state regulators.
Sebastian Morris (2000)36 has expressed the view that a “true
reform and restructuring electricity board of any state in India would
have to address the enormous leakage of revenue from the system.
This would call for privatization of distribution, and change in the
institutional mechanism for the administration of the subsidy as the
author has opined. Rather than the detailed regulatory mechanisms,
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which are being pushed by the central government and the regulators,
light and price-cap type regulation would suit India better. A model
plan for change is put forward for the Gujarat State Electricity Board,
which is quite general and could easily apply to other SEBs. The
author has suggested that complete separation of distribution from
generation is neither necessary nor desirable, existing IPP contracts
would have to be extinguished and methods to carry out the same. He
is of the view that the danger of mounting regulatory risk, either
shutting out private power production, or resulting in massive tariff
increases are real.
T.L.Sankar, Usha Ramachandra (2000)37 wrote on Electricity
Tariff Regulators. They examined the Orissa Electricity Regulatory
Commission (OERC) and found that it seemed to take the world
‘regulator’ strictly literally and considered development of the power
sector beyond its scope. They also explained the principles of retail
tariff fixation and critically examined the performance of the Orissa
Electricity Regulatory Commission (OERC).
Rao (2000)38 has carried out a study on Electricity Reform and
Regulation. He has commented that Independent regulations are new
in India. The writer further has expressed the view that public opinion
has to recognize its value. It will do so when it sees results in terms of
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improved quality, availability and in due course, reduced tariffs.
Ultimately the independence of regulators can only be guaranteed by
strong public opinion. While legislation is helping, it is important that
financial and human resources for regulatory commissions are kept
out of the scope of government approval.
Prayas Energy Group (2000)39 has found several reasons,
developments of power sector in Maharashtra till now which are much
different from many other reforming states. The PEG has opined that
ruinous financial impacts as well as strong public opinion against the
Enron project have forced MSEB/ GOM look for ways of avoiding this
crushing liability. It has suggested that only legal and techno-
economics innovations as well as strong political will would succeed in
relieving people of Maharashtra and other states too from the
unwarranted and high cost Enron Power. Further, the PEG has also
found that the regulatory process in the states is also much different
when compared to other states due to strong public intervention and
sector of exigencies, the MERC has to handle several important cases
such as amendments to PPA, subsidy by Govt., tariff revision and
merit order dispatch. Finally, it is opined that the regulatory process
in the states has resulted in the substantial improvement in the
transparency and public participation, but at the same time, several
further actions are needed to ensure that the process become
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sustainable and effective in protecting and promoting “public interest”
in the long term.
Sudha Mahalingam (2000)40 has carried out a study on the
implementation of reforms in the Power Sector of Orissa. She
expresses the view that the choice of Orissa for a pioneering electricity
reform experiment seemed logical. Orissa, a state with low literacy
rate low income levels and more importantly negligible agricultural
consumption (less than) is lacking in a constituency which could
effectively resist a drastic overhaul, nevertheless for the World Bank,
which wrote the reform script. Hence the choice of Orissa came about
more by accident than by design. Around the mid-90’s the Bank-
funded Upper Indravati Project which has made the state run into
rehabilitation problems. Unveiling to give up such a sizeable account
the Bank hit upon the idea of converting the upper Indicative loan into
reform loan and set aside 350 million Us dollars to be disbursed to the
Orissa Electricity sector in phased manner linked to specific
milestones in restructuring.
Surindar Kumar (2000)41 explained in his paper that the
process of power sector reform was initiated in India in the early
1990’s. Haryana was the second state after Orissa to undertake power
sector reforms under the overall supervision of the World Bank. The
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Haryana Electricity Reforms Act 1997 came into force with effect from
14 August, 1998. Consequently a number of structural changes were
undertaken. The writer examined the experience of electricity sector
reform process in the contest of Haryana State and expressed his
views in his paper on technical performance of the erstwhile HSEB
was analysed from its formation in 1967 to 1998 when it was
restricted under the reforms programme; the financial performance of
the erstwhile HSEB; the salient features of the reform process; the
functioning and order of the Haryana Regulatory Commission and the
lessons drawn from the reform process.
Parikh and S. Parikh (2002)42 discussed the state of the power
sector and experiences of power sector reforms in India. They also
suggested some means to enable state Electricity Boards to control
expenditure.
Stockholm (2003)43 analysed that key components of
sustainable development in the energy sector have been promoted
through public benefit programmes, albeit with mixed success. As
reforms are introduced into power sectors around the world, some
important public benefit programmes and social obligations are being
questioned by those traditionally responsible for the design and
implementation of these programmes. Power companies in
52
increasingly competitive markets find it hard to maintain spending on
programmes that promote public benefits. There is mounting evidence
from developing and developed countries alike that important public
benefit programmes and other efforts fall through the cracks during
reform. Programme areas that can promote public benefits include :
Energy efficiency, Renewable energy, Public interest R&D, Access to
modern energy services, Integrated resource planning, Environmental
protection.
Raju and Rao (2004)44 have examined the impact of power
sector reforms in AP. It is concluded that power sector reforms have
positive impact on Transmission and distribution. They have also hold
the view that the state sector generation had decreased during reform
period.
Ranganathan and D. Narasimha Rao (2004)45 reveals that
electricity reforms in India formally started along with economic
liberalisation in 1991-92, though the impetus for private sector
participation in the power sector predates this. Despite aggressive
reform policies in the 90s, private sector participation was moderate at
best, and the financial losses and cash flows of State Electricity
Boards (SEBs) reached crisis proportions. The author also explains
the current market rules to put in perspective the benefits of
53
competition. The current market is only a residual, unregulated
bilateral market overlaid on a contractually bound, bulk regulated
market. As such, the liquidity will remain low unless existing
contracts are migrated to the market. Production efficiencies, through
regional trade, are limited severely by the inflexible fuel markets. Open
access will facilitate capacity expansion, mostly for sale to private
distribution companies and industries, but the current rules do not
contain sufficient measures to discipline costs thereof. An important
benefit of trading, though, is to generate negawatts – avoided supply
needs – through better utilisation of existing capacity.
Rajikumar (2005)46 has opined that during the past 14 years
the ministry of power has produced several policy documents and has
issued numerous amendments. But it has failed to make any
significant improvements in the power sector. The new policy is
another example that the ministry is not yet ready to learn from its
own mistakes.
Sumir Lal (2005)47 has carried out a Case Study of the Power
Sector in India. The study finds that the weakness of the Indian power
reform programme has been that while it has focused on sorting out
distortions in the relationship between the owner-government and
power utilities through the unbundling and regulation model, it has
54
failed to carry credible assurances that this will improve the equation
between the reformed utilities and their consumers.
The study made by David G. Victor (2005)48 examined the
effects of Power Sector Reform on Energy Services for the Poor. It is
found that no inherent connection between the promotion of improved
welfare for the poorest households and the reforming of energy
markets. It finds that while electricity and development are correlated,
detailed studies have not clearly separated cause and effect. Insofar as
policy makers invest in electrification programs for the purpose of
promoting economic development, in fact there is not yet a robust
theory and practice to identify when such strategies are a superior
investment when compared with the alternative development
strategies. The report also finds that, in practice, very few countries
have actually implemented substantial reforms of their power sectors.
Rather than the “textbook” model of reform, they have implemented a
variety of half measures that have left SOEs in dominant roles with
private firms operating at the margins. These “reforms” have not much
altered the industrial organization of the electric power sector. Given
these two weak signals—the ambiguous link between overt
electrification and development, and the lack of much real reform in
developing country power markets—it is not surprising that the
55
reform processes observed so far have not had much effect on the
welfare of the poorest households.
Bikash Chandra Dash and Sangita (2011)49 examined the
impact of governance reforms on efficiency, equity and service delivery
in order to identifying the factors responsible for the success/failure of
reforms in the power sector in Orissa. It is found from their study
that the success of reforms depends not on mere change of ownership
from public to private. It depends on so many factors like to what
extent the stakeholders involved in the process are benefited and how
the institutions implement the policies in reality.
CONCLUSION:
This chapter has exhibited the studies conducted and review of
literature available on the subject of research. Literature on
development and evolution of the power sector, literature on problems
and challenges of power sector in terms of generation, transmission,
distribution, etc., literature on power sector reforms and literature on
power sector after reforms are presented in this Chapter. After this
review of literature, it is synthesized that the power sector in India is
facing severe problems. To solve these problems, the government of
India as well as the state governments have introduced reforms. But
these reforms are found to be failed to achieve the fruitful results on
56
the power sector. Though there are several studies conducted on the
subject, most of the studies are conducted on the said aspects. There
are very few studies that have been conducted on impact of power
sector reforms. No study is made elucidating the causes for the power
crisis from the micro - level. Thus there was a gap of the study on
the subject. Therefore after finding the gap of research, the study has
been undertaken on the above mentioned subject.
* * *
57
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